The Court of Appeal's judgment in Callery vs Gray threatens to land liability insurers with an additional bill of £600 for each motor-related personal injury claim, according to calculations from personal injury law firm Silverbeck Rymer.
The extra £600 could add £2.7m to the claims costs of a medium-sized liability insurer handling 10,000 motor-related personal injury cases each year.
Silverbeck Rymer associate partner Juliet Herzog, who presented the findings at a recent meeting at Lloyd's, said: “This example assumes that 90% of the 10,000 claims would be minor whiplash injuries, which fall within the bracket of Callery vs Gray.”
Using these calculations, the ruling could cost Britain's biggest insurer, Norwich Union, £27m, since it deals with 100,000 motor personal injury claims per year.
Herzog said: “The figures are indicative only – they may be higher in some cases where personal injury costs are greater.”
She said liability insurers would face the increased bill because the Court of Appeal had set a success fee of 20% in personal injury motor claims and had agreed it was reasonable for successful claimants to be able to recover any premium they had paid for after the event legal cover.
She calculated that these two rulings would each add £300, or £600 in total, to an average motor-related personal injury claim of £1,800. This figure comprises £1,500 for solicitors' costs and £300 for medical disbursements.
Herzog added that comparable costs for the same type of claim were around £1,400, (£1,200 solicitor costs and £200 medical fees) just two years ago.
Insurance law firm Rowe Cohen said the judgment would allow up to 150,000 personal injury motor claims that had been stalled in the courts to be settled.